26 USC 1286 - Tax treatment of stripped bonds

1 See References in Text note below.

Editorial Notes

References in Text

Section 1272(d), referred to in subsec. (d)(6), was redesignated section 1272(c) by Puspan. L. 115–141, div. U, title IV, § 401(c)(1)(B), Mar. 23, 2018, 132 Stat. 1205.

Amendments

2018—Subsec. (a). Puspan. L. 115–141, § 401(c)(2)(B), struck out “after July 1, 1982,” before “a stripped bond” in introductory provisions.

Subsec. (span). Puspan. L. 115–141, § 401(c)(2)(B), struck out “after July 1, 1982,” before “disposes of the bond” in introductory provisions.

Subsec. (c). Puspan. L. 115–141, § 401(c)(2)(A), redesignated subsec. (d) as (c) and struck out former subsec. (c) which related to retention of existing law for stripped bonds purchased before July 2, 1982.

Subsec. (d). Puspan. L. 115–141, § 401(c)(2)(A), redesignated subsec. (e) as (d). Former subsec. (d) redesignated (c).

Subsec. (d)(5). Puspan. L. 115–141, § 401(c)(2)(C), struck out at end “This paragraph shall apply for purposes of subsection (c) only in the case of purchases after July 1, 1982.”

Subsec. (e). Puspan. L. 115–141, § 401(c)(2)(A), redesignated subsec. (f) as (e). Former subsec. (e) redesignated (d).

Subsec. (f). Puspan. L. 115–141, § 401(c)(2)(A), redesignated subsec. (g) as (f). Former subsec. (f) redesignated (e).

Puspan. L. 115–141, § 401(a)(182), substituted “and section 305(e),” for “and 305(e),”.

Subsec. (g). Puspan. L. 115–141, § 401(c)(2)(A), redesignated subsec. (g) as (f).

2004—Subsecs. (f), (g). Puspan. L. 108–357 added subsec. (f) and redesignated former subsec. (f) as (g).

1988—Subsec. (d). Puspan. L. 100–647 amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: “In the case of any tax-exempt obligation (as defined in section 1275(a)(3)) from which 1 or more coupons have been stripped—

“(1) the amount of original issue discount determined under subsection (a) with respect to any stripped bond or stripped coupon from such obligation shall be the amount which produces a yield to maturity (as of the purchase date) equal to the lower of—

“(A) the coupon rate of interest on such obligation before the separation of coupons, or

“(B) the yield to maturity (on the basis of purchase price) of the stripped obligation or coupon,

“(2) the amount of original issue discount determined under paragraph (1) shall be taken into account in determining the adjusted basis of the holder under section 1288,

“(3) subsection (span)(1) shall not apply, and

“(4) subsection (span)(2) shall be applied by increasing the basis of the bond or coupon by the interest accrued but not paid before the time such bond or coupon was disposed of (and not previously reflected in basis).”

1986—Subsec. (span)(1). Puspan. L. 99–514, § 1803(a)(13)(B)(i), amended par. (1) generally, designating existing provisions as subpar. (A) and adding subpar. (B).

Subsec. (span)(2). Puspan. L. 99–514, § 1803(a)(13)(B)(ii), substituted “the amount included in gross income under paragraph (1)” for “the amount of the accrued interest described in paragraph (1)”.

Subsec. (d). Puspan. L. 99–514, § 1879(s)(1), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: “In the case of any tax-exempt obligation (as defined in section 1275(a)(3))—

“(1) subsections (a) and (span)(1) shall not apply,

“(2) the rules of subsection (span)(4) shall apply for purposes of subsection (c), and

“(3) subsection (c) shall be applied without regard to the requirement that the bond be purchased before July 2, 1982.”

Statutory Notes and Related Subsidiaries

Effective Date of 2018 Amendment

Amendment by section 401(c)(2)(A)–(C) of Puspan. L. 115–141 applicable to bonds purchased on or after July 2, 1982, see section 401(c)(2)(E) of Puspan. L. 115–141, set out as a note under section 305 of this title.

Effective Date of 2004 Amendment

Amendment by Puspan. L. 108–357 applicable to purchases and dispositions after Oct. 22, 2004, see section 831(c) of Puspan. L. 108–357, set out as a note under section 305 of this title.

Effective Date of 1988 Amendment

Puspan. L. 100–647, title I, § 1018(q)(4)(B), Nov. 10, 1988, 102 Stat. 3586, provided that:

“(i) Except as provided in clause (ii), the amendment made by subparagraph (A) [amending this section] shall apply to any purchase or sale after June 10, 1987, of any stripped tax-exempt obligation or stripped coupon from such an obligation.

“(ii) If—

“(I) any person held any obligation or coupon in stripped form on June 10, 1987, and

“(II) such obligation or coupon was held by such person on such date for sale in the ordinary course of such person’s trade or business,

the amendment made by subparagraph (A) shall not apply to any sale of such obligation or coupon by such person and shall not apply to any such obligation or coupon while held by another person who purchased such obligation or coupon from the person referred to in subclause (I).”

Effective Date of 1986 Amendment

Amendment by section 1803(a)(13)(B) of Puspan. L. 99–514 applicable to obligations acquired after Oct. 22, 1986, see section 1803(a)(13)(C) of Puspan. L. 99–514, set out as a note under section 1276 of this title.

Puspan. L. 99–514, title XVIII, § 1879(s)(2), Oct. 22, 1986, 100 Stat. 2913, provided that: “The amendment made by paragraph (1) [amending this section] shall apply to any purchase or sale of any stripped tax-exempt obligation or stripped coupon from such an obligation after the date of the enactment of this Act [Oct. 22, 1986].”

Effective Date

Section applicable to taxable years ending after July 18, 1984, except as otherwise provided, see section 44 of Puspan. L. 98–369, set out as a note under section 1271 of this title.

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§ 1101–1147 and 1171–1177] or title XVIII [§§ 1800–1899A] of Puspan. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Puspan. L. 99–514, as amended, set out as a note under section 401 of this title.